AM Best Affirms Credit Ratings of Union Insurance Company Limited

HONG KONG--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A- (Excellent) and the Long-Term Issuer Credit Rating of “a-” (Excellent) of Union Insurance Company Limited (Union) (Taiwan). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Union’s balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management.

Union’s risk-adjusted capitalization remains at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). The company’s capital grew organically through partial profit retention in the past years, supported by positive operating results. Despite the COVID-19 pandemic continuing to develop in Taiwan since April 2022, Union’s loss exposures in COVID-related insurance products are expected to be manageable. Based on the latest information available to AM Best, it does not expect COVID-19-related claims will lead to a major capital erosion to Union’s adjusted capital, which includes non-compulsory automobile liability insurance special reserves.

In regard to Union’s operating performance, COVID-19-related claims might add short-term underwriting pressure in 2022. Excluding this one-off event, the company’s adequate operating performance remains supported by a five-year average (2017-2021) return on adjusted capital and surplus of 10.7%. In 2021, while the company’s net combined ratio, excluding compulsory motor business, remained stable, the company’s net loss ratio slightly deteriorated in 2021, mainly attributed to a slightly higher net loss ratio in fire and voluntary motor business. The slightly higher net loss ratio was offset by a slight improvement in the company’s net expense ratio and resulted in a stable overall net combined ratio.

Union is a medium-sized player in the Taiwan non-life insurance market and ranked eighth in 2021 in terms of direct premium written. Similar to other players in the market, the company’s underwriting portfolio is moderately diversified but slightly skewed toward motor business, with other major business lines in fire and accident business. The company maintained a diversified distribution channel mix, with major business contributors in car dealers, direct channel and brokers.

While Union is well-positioned at its current rating levels, negative rating actions could occur if there is a sustained deterioration in the company’s operating performance, or a significant decline in its risk-adjusted capitalisation.

Ratings are communicated to rated entities prior to publication. Unless stated otherwise, the ratings were not amended subsequent to that communication.

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